Insurance - Head Matters

4. Health Insurance

a. Types of health insurance (continued)

Indemnity Health Plans allow you to choose your health care providers. You can go to any doctor, hospital or other provider for a set monthly premium. The plan reimburses you or your health care provider based on services rendered. You may be required to meet a deductible up to a certain amount and pay a percentage of each bill. However, there is also often an annual limit on out-of-pocket expenses, so that once an individual or family reaches the limit, the insurance covers the remaining eligible medical expenses in full. Indemnity plans sometimes impose restrictions on covered services and may require prior authorization for hospital care or other expensive services.

Cafeteria/Flexible Spending Plans are employer-sponsored plans that allow the employee to design his or her own employee benefit package, choosing between one or more employee benefits. Several types of Flexible Benefits or Cafeteria Plans are used by employers, including a pre-tax conversion plan, multiple option pre-tax conversion plan, medical plans plus flexible spending accounts, and employer credit cafeteria plans. For more information about these choices, contact your employee benefits department.

“Basic and Essential” Health Plans provide limited health insurance benefits at a considerably lower cost. If you are thinking about buying one of these plans, read the policy description carefully because these plans don’t cover some basic treatments, such as chemotherapy, certain prescriptions and maternity care. Also, rates vary considerably because premiums are community rated and are based on your age, gender, health status, occupation or geographic location.

Health Savings Accounts (HSA) are a recent alternative to traditional health insurance plans. HSAs are basically a savings account at a bank or other financial institution designed to offer you a different way to pay for your health care. With HSAs, you save for future qualified medical and retiree health expenses on a tax-free basis. Instead of paying a premium, you establish a tax-free savings account that covers your out-of-pocket medical expenses. This means that you own and control the money in your HSA. You make all decisions about how to spend the money you’ve saved for your health. You also decide what types of investments to make with the money in the account to make it grow. However, if you sign up for an HSA, you are generally required to buy a high deductible health plan as well.

High-Deductible Health Plans (HDHP) are sometimes referred to as catastrophic health insurance coverage. An HDHP is an inexpensive health insurance plan that kicks in only after a high deductible is paid by you of at least $1,000 for an individual or $2,000 for a family.